The Carbon Price and the Cost of Living - The Climate Institute
The Carbon Price and the Cost of Living - The Climate Institute
The Carbon Price and the Cost of Living - The Climate Institute
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AECOM<br />
<strong>The</strong> <strong>Carbon</strong> <strong>Price</strong> <strong>and</strong> <strong>the</strong> <strong>Cost</strong> <strong>of</strong> <strong>Living</strong><br />
9 November 2011<br />
7<br />
1.3.2 <strong>Carbon</strong> price trajectory<br />
<strong>The</strong> analysis focuses primarily on <strong>the</strong> impact in 2012/13, based on <strong>the</strong> announced set carbon price. Analysis <strong>of</strong><br />
impacts over time, such as a potential second inflation impact in 2015/16 is based on projections <strong>of</strong> <strong>the</strong> carbon<br />
price suggesting a carbon price <strong>of</strong> $29 per tonne in 2015/16 (based on Treasury 2011a). This is consistent with<br />
current price trajectories (see Jotzo <strong>and</strong> Hatfield-Dodds, 2011), <strong>and</strong> with global action on track to achieve <strong>the</strong><br />
national pledges contained in <strong>the</strong> Cancun Agreement (formalising <strong>the</strong> Copenhagen Accord) which represents<br />
around 5-9GT <strong>of</strong> abatement, but falls short <strong>of</strong> being confidently on track to limiting global warming to no less than<br />
2 degrees Celsius (UNEP, 2010)<br />
1.3.3 <strong>Cost</strong> pass through <strong>and</strong> Industry Assistance<br />
<strong>The</strong> Clean Energy Future package provides assistance to support Australian businesses transition to a clean<br />
energy future. This includes a Jobs <strong>and</strong> Competitiveness Program to assist emissions-intensive, trade exposed<br />
industries. This study does not account for <strong>the</strong> industry assistance <strong>and</strong> as such may over-estimate <strong>the</strong> impacts on<br />
households.<br />
Due to data limitations, <strong>the</strong> analysis also assumes that small facilities (that are not liable for <strong>the</strong> carbon price) are<br />
‘price takers’ <strong>and</strong> pass through <strong>the</strong> value <strong>of</strong> <strong>the</strong> carbon price as if <strong>the</strong>y were liable. This may overstate <strong>the</strong> impact<br />
<strong>of</strong> <strong>the</strong> carbon price, but <strong>the</strong> effect <strong>of</strong> this assumption is likely to be small.<br />
Assumptions about cost pass through are discussed in Section 2.1 below<br />
.
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